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From Antitrust Law Daily, February 17, 2016

Apple settlement providing up to $400M for e-books consumers upheld

By Jeffrey May, J.D.

The U.S. Court of Appeals in New York City has upheld a settlement resolving price fixing claims against Apple Inc. brought on behalf of consumers of e-books. An objector unsuccessfully challenged the fairness, reasonableness, and adequacy of the settlement, which could provide up to $400 million in damages to consumers, plus a total of $50 million in attorney fees and costs to the private plaintiffs and to the states that brought suit as parens patriae (In re: Electronic Books Antitrust Litigation, February 17, 2016, Per Curiam).

The appellate court rejected the objector’s arguments that approval of the settlement was “premature” and not yet ripe for consideration. The objector contended that approval of the settlement was premature because the actual payout depended on the outcome of a liability appeal that was pending at the time Apple entered into a class action settlement. Under the terms of the settlement agreement, Apple agreed to pay a total of $400 million in compensation for consumers who purchased e-books between roughly April 2010 and May 2012; a total of $20 million to the plaintiff states to cover their fees and costs; and a total of $30 million to cover the fees and costs of settlement class counsel. The payments would be made only if the liability finding against Apple in a federal/state enforcement action was affirmed by the appellate court. The finding has since been upheld, but Apple has filed a petition for U.S. Supreme Court review, questioning the Second Circuit’s judgment.

The appellate court noted that the objector waived the prematurity argument. However, even if the argument had not been waived, the appellate court would have rejected it. According to the objector, the district court could not properly analyze whether the settlement was fair due to the pending liability appeal.

The appellate court explained that every settlement requires a court to assess the likely outcome of future legal proceedings. And the district court in this case had sufficient evidence to determine the adequacy of the settlement. It had issued a thorough opinion on Apple’s liability; ruled on a motion for class certification; and resolved several disputes regarding the admissibility of evidence at the damages trial.

As for the objector's argument that the settlement was not yet “fit for judicial decision,” the appellate court explained that ripeness concerns were “threshold criteria for the exercise of a federal court’s jurisdiction” that were not at issue in this case. Apple was alleged (and found) to have orchestrated a conspiracy among publishers to raise prices of e-books; consumers sought to recover for harm allegedly suffered as a result of inflated prices; and the district court properly evaluated the settlement of the damages claims.

Although not in dispute, the appellate court also pointed out that approval of the settlement was not an abuse of discretion in light of the complexity, expense, and likely duration of the litigation; the reaction of the class to the settlement and paucity of objections; and the reasonableness of Apple's promised payments to consumers in light of the possible recovery after trial. An expert for the private plaintiffs had estimated total consumer losses resulting from the conspiracy to be approximately $280 million, the appellate court noted. In light of approximately $166 million in payments to consumers from the publisher defendants—Apple’s alleged co-conspirators—the settlement would provide consumers just over 200 percent of their estimated losses (if the liability finding were affirmed), and 77 percent of their estimated losses (if the liability finding was either reversed and remanded, or vacated and remanded), the court explained.

The case is Nos. 14-4649(L), 14-4710(Con).

Attorneys: Steve A. Miller (Steve A. Miller, P.C.) for Objector-Appellant John Bradley. Gary M. Becker, Assistant Attorney General, State of Connecticut, for Plaintiff-Appellee States. Steve W. Berman, Jeff D. Friedman, and Shana Scarlett (Hagens Berman Sobol Shapiro LLP) and Kit A. Pierson, Jeffrey Dubner, and Douglas Richards (Milstein Sellers & Toll PLLC) for Plaintiffs-Appellees.

Companies: Apple Inc.

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